Archive for the ‘Banking’ Category

Thursday, August 16th, 2018

Photo: edgarstewart.com

Thank goodness all giant corporations aren’t leaping into bed together to share respective expertise and information although some are inching in that direction and others are raring to go. It won’t be long.

But first a digression: In arriving at the topic for this post I counted seven fuzzy attributions in one newspaper article. Isn’t that a lot? Laced throughout a recent front page article in The Wall Street Journal I read: “According to people familiar with the conversations; the people said; a person familiar with the discussions said; some of the people said; said people familiar with the matter; some of the people said and people familiar with the matter said.”

Reporters Emily Glazer, Deepa Seetharaman and AnnaMaria Andriotis wrote that Facebook had spoken with people at JPMorgan Chase, Citigroup and U.S. Bancorp “to discuss potential offerings it could host for bank customers on Facebook Messenger.” Facebook Messenger is a messaging app and platform.

What did “people say” about the conversations? “Facebook has talked about a feature that would show its users their checking-account balances, the people said. It has also pitched fraud alerts.” In addition, “Facebook asked banks for information about where their users are shopping with their debit and credit cards outside of purchases they make using Facebook Messenger.” Messenger has 1.3 billion active monthly users according to the reporters.

Photo: pinterest.com

Timing could be better for this outreach. The reporters reminded readers about current investigations in which Cambridge Analytica accessed data on some 87 million Facebook users without user OK. “‘We don’t use purchase data from banks or credit-card companies for ads,’ [Facebook] spokeswoman Elisabeth Diana said. ‘We also don’t have special relationships, partnerships or contracts with banks or credit-card companies to use their customers’ purchase data for ads.’”

Banks are tempted by the digital reach and doing business with online platforms with healthy and growing businesses. Even though Facebook has introduced what it says are safety features, “Bank executives are worried about the breadth of information being sought, even if it means their bank might not being available on certain platforms their customers use.”

While PayPal and Square have beaten banks to the punch in the world of mobile commerce many customers continue to be comfortable with traditional ways of paying such as credit and debit cards, cash and checks.

Photo: timeanddate.com

Some deals between big players are already struck though I question their purpose: American Express members can reach a rep through Facebook. [Why would you need to do that?] Paypal users can send money through Facebook Messenger and Mastercard’s Masterpass digital wallet lets customers place online orders with some merchants.

Before all these mergers of communications, customers and data happen, shouldn’t there first be a firm grasp on digital customer privacy? Why are we becoming so lazy: Is it so onerous to check a balance on your bank’s website that you need Facebook do it for you? Can you believe that AmEx members can’t reach out to a company rep but instead need Facebook to do it for them? These “benefits” appear to potentially favor everyone but the consumer—do you agree? Do you pay for things via mobile wallet, credit or debit cards, cash or checks? And last, does an article with more than a few generic attributions disturb you?

Monday, December 4th, 2017

Photo: whats-thesayinganswers.com

Parents expect their kids to test them daily but is it natural for a bank, caught red-handed in one scandal, to again test a federal regulator with another cheat just a year later? I’m referring to Wells Fargo, once a stalwart bank with stellar reputation and the third largest in the US.

Last year staff, to gain bonuses, created as many as 3.5 million accounts, some fictitious, others without customer approval. In addition to the chink in its standing, this cost the bank a $35 million penalty, restitution to some customers and a freeze on executive golden parachutes. Plus the chairman was forced to resign.

What now? “A federal regulator has advised Wells Fargo & Co.’s board of directors that it is weighing a formal enforcement action against the bank over improprieties in its auto-insurance and mortgage operations,” according to Gretchen Morgenson and Emily Glazer in their Wall Street Journal article, “Wells Fargo Gets New Warning.” The regulator is the Office of the Comptroller of the Currency [OCC].

Photo: dialforloan.com

The reporters wrote: “This summer, the bank conceded in a news release that for years it had forced nearly 600,000 customers who financed their car purchases with Wells Fargo to pay for collision coverage they didn’t need. The bank said about 20,000 customers had their cars wrongly repossessed. Those customers failed to pay the improper insurance charges.”

Photo: fhmtg.com

In addition they reported: “The bank has also said it charged some customers improper fees to extend the interest-rate commitments they received from Wells Fargo on their mortgage applications. In October the bank said it is reaching out to around 110,000 customers who paid a total of $98 million in such fees, and expects refunds to be lower than that total because, the bank said, it ‘believes a substantial number of those fees were appropriately charged under its policy.’”

The OCC “gave the bank credit for identifying the irregularities in its insurance operations but characterized Wells Fargo’s management of compliance risk as ‘weak.’ The report also said the bank had underestimated the amount of restitution it owed to wronged customers.”

Does today’s business atmosphere, inspired by Washington, give signals to businesses to push the envelope and hope for the best? Recent indicators include loosening of climate regulations, and the appointment by the president of Mick Mulvaney as acting director of the Consumer Financial Protection Bureau when Mulvaney doesn’t believe in restrictions. Do the small fries in this country feel sufficiently threatened yet? Why would a bank allow its reputation to take such a beating?

Monday, July 31st, 2017

Photo: funusualsuspects.com

You may want to take a quick look at the Consumer Complaint Database maintained by the Consumer Financial Protection Bureau [CFPB] before it joins rolled-back EPA regulations and watchdogs that once protected American consumers that are severely relaxed or gone. The goals are the same: Make it easier and cheaper to conduct [big] business, in this case, for banks.

You’d read on the website: “Each week we send thousands of consumers’ complaints about financial products and services to companies for response. Those complaints are published here after the company responds or after 15 days, whichever comes first. By adding their voice, consumers help improve the financial marketplace.”

Photo: consumerfinance.gov

Copy on the home page continues: “By submitting a complaint, consumers can be heard by financial companies, get help with their own issues, and help others avoid similar ones. Every complaint provides insight into problems that people are experiencing, helping us identify inappropriate practices and allowing us to stop them before they become major issues. The result: better outcomes for consumers, and a better financial marketplace for everyone.”

She wrote, “Responding to calls from industry groups, the Treasury Department in June recommended restricting access to the data to federal and state regulators.” She reported that since it was founded in 2011, consumers have filed 800,000 complaints the public can see, 1.2 million in all.

“The dispute highlights areas of friction as the Trump administration and other Republicans consider rolling back rules put in place after the financial crisis,” she wrote. “Those pushing for loosened rules say removing onerous and costly requirements would encourage more lending and economic growth. Opponents say such changes would bring back reckless behavior that caused the financial crisis.”

Photo: salon.com

A St. Paul social worker asked his student loan company to lower his monthly payments and after four to five tries, the temporary solution increased his monthly bill Hayashi reported. Two days after he posted a complaint on the CFPB complaint database, they sent him “several repayment options.” The social worker credits the CFPB.

Hayashi wrote that the Treasury Department felt the site “subjects companies to unwarranted reputational risk.” However, she continued, “Consumer advocates and some financial-services experts… say that the portal’s public nature is what gives it teeth.

What do banks think? “The bureau has failed to address the significant problems in the accuracy, integrity and usefulness of the information reported in the database,” Virginia O’Neill, senior vice president at the Center for Regulatory Compliance at the American Bankers Association told Hayashi.

Did you know you could post complaints about dealings gone south with a financial institution? Have you had a nasty banking issue? Do you believe that the complaints on the Consumer Complaint Database should be hidden from the public or allowed to be seen, as they have been for six years?

“At issue is a Consumer Financial Protection Bureau rule approved in July barring fine-print requirements that consumers use arbitration to resolve disputes over financial services. The rule makes it easier for consumers to join class-action lawsuits against banks and credit-card companies. Though fiercely fought by the financial industry, it is set to go into effect in March.”

In addition: ” However, support in the Senate is uncertain. No Democrats are likely to back the effort, and Republicans, with their slim majority, can’t afford to lose more than two GOP votes. Several Republican senators have expressed reservations about voting to overturn the regulation, worried they may be portrayed as siding with banks and against consumers.”

This is something so easily lost among all the distractions for consumers to keep an eye out for.

Thursday, June 2nd, 2016

There’s a surprise associated with an unexpected outcome, mostly happy, but not always.

Juicy

I am grateful when a grocery store cashier gives me the discount when I buy only one in a promotion offering a fantastic price if I buy two. It happened when I bought a giant Tropicana OJ at Morton Williams this week. I didn’t want, nor could I use, two. Her decision put me in a good mood and the store on my “I’ll be back” list.

Check it out

I put a stop-payment on a check when I learned that a hefty May payment never arrived. The USPS let me down. I went nuts. When I arrived at Chase Bank in Pleasant Valley, N.Y. the Friday before Memorial Day weekend, I was rattled. I saw my stellar credit rating going up in smoke.

Stacia Zimmerman, bank manager, greeted me pleasantly and was sympathetic. She made a copy of the new check and late notice for my records and gave me an extra copy of the stop-payment confirmation to include with the check. She even gave me an envelope so I could go immediately to the nearby post office to zip the replacement check by Priority Mail! To my astonishment, she waived the $30 stop payment fee as well.

I also noticed that Ms. Zimmerman called almost every person who entered the bank by name. She merged a charming, small town feeling with the benefits of a very big bank.

Dining Disaster

Then there was the dinner that we’d happily anticipated at a restaurant we’d visited for brunch and lunch, marveling at the food and cheery service. When we arrived the place looked fairly full but not jammed, however there were only two waitresses in view. We were seated promptly by a pleasant server—the older of the two–and then ignored. We waited and waited. Eventually, after perhaps half an hour, the other waitress took our order. Then we waited again.

An hour after we had arrived, having asked three times for two glasses of white wine, only one arrived half full in a diminutive Champagne glass and the second, 10 minutes later. Meanwhile, staff was handing out beer and wine to those waiting for a table.

Did I mention that the AC wasn’t on and it was 80+ degrees outside? People tend to eat–and order more–when not roasting.

Our main course and one of two appetizers arrived together half an hour after the wine. They tasted fine, but still. We never saw the bread; no spoon came to capture the sauce in one dish. We’d given up by then.

The course we didn’t get remained on the check. My husband had to send it back a second time so the tax reflected the reduced total. He’s a generous man, but he was irritated.

At the next table when food arrived for a graduate and five celebrants, there was nothing for one in that party. She slapped her head in exasperation. Once they’d eaten the grandmother said, “The food was good but the management severely lacking.”

What had happened? The restaurant didn’t realize that it was graduation weekend for a local college, [a waitress admitted], and wasn’t prepared. By not turning away the unexpected customers to handle only the number they could manage, they ruined the evening for everyone.

Can you share unexpected outcomes, both good and bad? What else might the restaurant have done to salvage its disaster?

Monday, June 22nd, 2015

There’s a child passenger safety commercial featuring competitive parents in a playground who repeatedly say, “I know that,” after a string of kid-related factoids such as “did you know that friendly kids have more friends?” or “did you know that boys who play with dolls make better husbands?” The last mother to speak asks: “did you know that parents think that they are using the right car seat for their kids but they are not?” This the assembled men and women didn’t know.

There are times that I think I’ve discovered something that it turns out everyone else already knows. Here are three instances:

The last word

I recently heard about funeral homes that play a tape of the deceased talking to those assembled at the funeral. The tape was [obviously] made before the grim reaper arrived. The practice was new to me.

Check it out

I pay for groceries by credit card. I’d changed handbags and realized, at the grocery checkout, that I had none with me. On the belt was a large pile of groceries I’d selected so I paid by check–which I haven’t done in decades. The cashier handed me back my check, marked void all over it, with my receipt. Printed on the receipt was: “When you provide a check as payment, you authorize us to use information from your check to process a one-time Electronic Funds Transaction {EFT} or draft drawn from your account, or process the payment as a check transaction. You also authorize us to process credit adjustments, if applicable…….” This instant paperwork and getting back the check from the cashier was all new to me!

All welcome

I watched Beau Biden’s funeral on C-SPAN and was impressed when Rev. Leo J. O’Donovan, who gave the homily and officiated, [photo, right], told the assembly that they are all invited to approach the alter during communion. The emeritus president of Georgetown University advised those unable to receive communion [because they are not Catholic or didn’t want to partake], to cross their arms over their chests so that they would instead receive a blessing. Seems this welcome practice has been going on, especially at weddings and funerals, for 20 years. My friends knew about it. I’ve been to Catholic funerals and ceremonies in two decades yet it was new to me.

Fireworks

Small fireworks are now legal in New York State. I saw them for sale on Sunday at the A&P.The brother of a college boyfriend had blown off three fingers in a fireworks accident in high school so beyond sparklers, while I love watching them, going near them makes me nervous.

I sometimes ask myself, “Where have you been?” Do you? Have you recently “discovered” something everyone else already knows about?

Thursday, August 1st, 2013

Yesterday morning NY metro area talk show host John Gambling directed the audience’s attention to The Wall Street Journal’s “Money & Investing” pages. His distress was over the sheer number of articles about banks given paltry penalties for cheating and stealing—and no punishment for the executives.

Not counting coverage in the “Heard on the Street” or “The Property Report” subsections, I counted 11 major articles, of which seven were about bank or hedge fund crime.

To a bank a fine becomes a cost of doing business noted Gambling on WOR 710 Radio. He added that it’s passed on to investors while executives sit securely in their chairs. “There’s no culpability for individuals who dip into shareholder’s pocketbooks,” said his guest, author William D. Cohan, whose most recent best-selling book was “Money & Power: How Goldman Sachs Came to Rule the World,” [Doubleday, 2011]. Cohan underscored the “Symbiotic codependency between Washington and Wall Street.”

In case you missed and wanted to read them here are five of the 11 headlines:

If you were whisking through the Journal on a tablet or smartphone I wonder whether you’d miss the quantity and impact of all these stories that become vividly evident on the print pages. Gambling, whose stand is pro-business, said he didn’t know what to do to stop this cheating other than to shed a spotlight on it. I’m glad he did. Do you have any suggestions? Is it worse than before or more of the same?

Tuesday, February 12th, 2013

Here’s one more notch in the belt of “if you want service, this is what you must do yourself.”

Credit on Hold

My husband’s credit card account was closed. He found out when he tried to charge some meds and food and the charges didn’t go through in either store. To find out what was going on, he called the credit card provider.

Had he thought to look at his account online before leaving the apartment, he would have seen that there was a notice that the bank had closed it. So we don’t have to learn the news at the cash register, perhaps we should add checking online to the morning routine, after we brush our teeth or before we check that we have our keys.

He learned that a travel agency in the UK tried to charge something to his card which the credit card company determined to be suspicious. American Express telephones–at least it did when I had a similar problem.

Servers that Don’t

Meanwhile I was given the bum’s rush by my email host. I spent three weeks in email hell, unable to send any at times for no reason. People sending emails to me received bouncebacks and we couldn’t figure out why.

After doing everything possible to solve the problems and several calls to the company I spoke with one honest fellow late one night who told me “We’ve been working on the server for the last week,” and “the problem is beyond our systems.” He admitted they didn’t know how to fix it yet, wanted me to know the real story so I didn’t blame my high speed connection, my computer, anything or anyone else–all of which I had. I asked when he thought it would be repaired and he said “24 to 48 hours.”

Two days later I called again and spoke with the first obnoxious person I’d confronted at this company in the many years it had been my vendor. I kept asking him if they’d repaired the server and he’d respond with “I need to see a copy of the original bouncedbacked email.” I would say, “I sent you the bounceback notification. How can I send you the original that I never got? Please answer my question: ‘Are your servers up and running’?”

I gave up and now have a new email host.

In addition to lost time, frustration and goodness knows how many emails I never received because they were bounced back and the senders didn’t let me know [it’s not their job], I also spent a tidy sum on the wonderful IT person who was trying to figure out what was what on my end.

So why didn’t this vendor inform its millions of customers? I fished around online for clues and there were none. This is a company that communicates like crazy when it wants to. I get emails almost daily about what other services I should buy from them yet not a peep about email server issues. They have the money: They ran a [extremely distasteful] commercial during the Super Bowl.

I anticipate problems when a company spends more money on marketing than on its product. For years these people were terrific–they had the balance right.

Do you have examples of do-it-yourself service or businesses that spend more on marketing than on their product or service?

Monday, April 2nd, 2012

With $67 billion of student loans in default it appears that some of the borrowers aren’t asking the right questions. Janet Lorin wrote: “Almost two-thirds of U.S. student-loan borrowers misunderstood or were surprised by aspects of their loans or the student-loan process, a study shows.”

She continued, in “Student Borrowers Lack Understanding of Loan Terms,” on Bloomberg.com: “About 20 percent of the respondents in an online survey said the amount of their monthly payments was unexpected, according to the study released today by Young Invicibles, a nonprofit group in Washington that represents the interests of 18-to-34 year-olds. The respondents had an average of $76,000 in student debt.”

In addition, borrowers probably didn’t calculate what their potential salary might be in their chosen field, what the job opportunities are and what the added value would be to attend a private school with its $60,000/year tuition, room and board–taking Georgetown as an example–vs. a state or community college where they can live with relatives. Undergraduate tuition at the City University of New York is $5,130.

How do you Feel?

Meanwhile, the Justices of the Supreme Court are looking at the legality of Obamacare. What they are considering is if there are limits to Congressional intervention in people’s lives. Talk show pundits refer to this question as “Can Congress make you eat your broccoli?” Wonder what the answer will be.

Hot Topic

I heard an articulate spokesperson make her case about tanning beds in a radio interview. She wanted the legislation in her state to follow California where it’s against the law for teens under 18 to use them. Emma Jones on Limelife.com reported on these findings by the Skin Cancer Foundation: “…indoor tanners are 74 percent more likely to develop melanoma than those who have never tanned indoors. What’s more, across the US each year, 2.3 million of tanning bed users are teens.”

Jones also reported: “California had previously banned minors under the age of 14 from using tanning beds, but allowed those between 14 and 18 years of age to use tanning beds with parental consent. Texas has also banned the use of tanning beds for children under 16, but California’s new bill has made them the first state to set a higher age limit.”

When the MC asked this spokesperson: “How many tanning bed businesses are there in the US and how big a business is it?” she had no clue. Within a minute of hanging up, his producer had the answers. The takeaway: When you are a spokesperson, think of the obvious questions you’ll be asked about the topic you’re covering and keep the answers at hand. It’s so easy to do these days!

How Taxing

On his radio show about money, Ric Edelman was trying to make losers feel better about the outcome of the Mega Millions lottery. He told the audience about a winner of $10 million who divided her winnings: 49 percent for herself, 51 percent for her mother and siblings.

She lost a court case in which she fought the tax man, ending up paying 90 percent of her winnings to gift taxes.

Before picking up her winnings, she should have asked a whole bunch of questions. She’d have learned that the maximum amount of money she can gift someone without paying a gift tax is $13 thousand a year. She’d have been better off to have picked up the winnings with family members as a group. Ric was being funny when he said she should have hired an accountant and lawyer even before buying the winning ticket.

Have you landed in a spot because you didn’t ask the right question or weren’t prepared with the answers?

Monday, October 10th, 2011

In a discussion about the Wall Street protestors during a radio interview Friday morning, Mayor Bloomberg said, [I am translating what I remember and think I heard, this is not a direct quote], that for the economy to get back on track we should stop looking for blame and quit looking backwards to the cause of the economic downturn and no longer distract these bankers and other corporate types: Let them get back to work.

I disagree with the Mayor. Maybe it’s because I’ve been burned as have countless others. Call me a sore looser.

I fully believe in forgiveness, hard as it might be to achieve, and bad as my track record is. This is business, not friendship. It doesn’t set well with me that having weaseled millions out of millions the heads of banks and corporations should sit on their yachts and in their mansions without so much as a knuckle tap to warn others who plan to follow their lead.

Call me Pollyanna, but at the least, they should propose sets of restrictions on themselves. Other industries do it because they don’t want the government telling them what to do. Smart. Guess these folks feel safe, with elections coming up next year. Who dares bother them right now?

And why would we want to leave in charge of the fix the same folks who helped get us where we are with their “Let them eat cake” mentalities? Should we let them get more bonuses, personally profiting twice from flimflammery?

I think we make a bigger fuss over sports figures who break records by taking steroids.

Is forgiveness the issue here? Should we let Wall Street bankers go about their business as usual, make no restrictions that might help avoid our falling into similar pits now and in future, and take none of them to task?

Thursday, October 6th, 2011

The Standard & Poor’s downgrade of US debt sent shivers down spines. Frank Paine [known previously on this blog as Zachary], a retired Federal Reserve Examiner and international commercial banking officer, describes the world of financial rating agencies. He covers where and how they started, how they are used to analyze other industries and governments and he shares his opinion of how useful their conclusions are.

He wrote:

An old friend who knows my background, and who is himself a retired international banker, recently asked me: “As a credit guy, what is your take on S & P’s downgrade?” He continued, “My initial reaction was positive, but what does it mean if, in fairness, they have to downgrade everybody else except Switzerland?”

With a wonderful sense of irony, he followed this question with “Hope all is well.” [He was referring to something else, but his choice of words and timing was wonderful!]

What a great question! There are a lot of interesting angles to this issue. To start with, I’m not even sure about Switzerland, but doesn’t that raise the question of what use the ratings are if every country is rated the same? They are useless if we can’t use them to distinguish varying levels of credit risk.

My understanding is that the system for rating publicly issued securities came into being quite some decades ago in large measure as a function of insurance company regulation. The public policy issue was the companies’ solvency for paying claims (liability companies) or benefits (life companies). It was thought that citizens buying policies were not capable of understanding the level of risk in insurance company balance sheets, and therefore there should be a way of measuring and communicating that level of risk that would not require “buyers to beware.” A corollary to this notion was that insurance companies should not be risk takers.

Over the years, regulators (and others) found that these ratings could have other useful applications, such as, for example, measuring the degree of risk in commercial banks’ bond portfolios. And indeed, many “players” in the finance industry found that it was easier and cheaper to measure their risk by depending on the ratings. Even commercial banks, once places that were expected to do their own credit analysis, found (lazily) that they could outsource their credit risk management. Instead of duplicating the agencies’ analytical work, they could simply borrow it, saving their own analysis for business that was not publicly traded. In recent years, the agencies have developed a system for rating securities that are not publicly traded. I am not an expert on this, but I gather that they have developed statistically based models that they feel are acceptable proxies for the publicly traded situation.

But how does all this work when considering sovereign risks? What statistical basis can one find for assessing the credit risk of sovereign states? We know that they occasionally go into default, but do they go bankrupt? Bankruptcy is a legal status, not a financial status. To what court do you take a sovereign defaulter to get it to acknowledge bankruptcy? None, of course…they don’t declare bankruptcy. They default perhaps, or terms get adjusted, sometimes “haircuts” get applied, interest rates get reduced, and so forth, but they never declare bankruptcy.

Let’s take this a step further. With corporate business, there is a huge database of financial performance. Using multiple discriminant analysis, one can even define the probability that specified factors will affect the probability of default and bankruptcy. Can one duplicate this for sovereign states? I would say “no,” because the database is simply not big enough. And I think this is where the agencies slipped, basically because they put too much faith in their own models, and assumed that they could identify the factors leading to default, and then apply relevant probabilities. The probabilities were highly flawed.

So, how should one consider sovereign risk? Sovereign risks are inherently political, and so the ratings must reflect political analysis, something that financial analysts are notoriously not very good at. Heaven knows that political factors are what determine whether or how a country will go into default-the present state of things in the EEU provides an excellent example.

I believe that it is an error to think that rating systems designed for the management of corporate risk can be applied to sovereign risk. Sovereign risks should have their own, separate rating system, based on political factors rather than financial factors. Whether this can in fact be achieved is questionable, but the attempt might be worth the effort. It probably should be done by separate agencies, thus avoiding possible conflicts of interest.

So, to summarize, all is not well. This field needs a lot of work.

If Frank Paine is correct–that a country’s financial strength and stability should be looked at by a rating agency specializing in the analysis of sovereign states, not in financial institutions and corporations–was the S & P downgrade more of a public relations slap than an accurate analysis? Do you think that most people have an idea that the economy is in deep dish distress without confirmation by a rating agency? Do you fear that we are on the brink of panic? Will the Wall Street protesters have any affect in redressing our problems?